A banknote has been sitting in my wallet for six months now. As time ticks on, it burns an ever greater hole in my pocket.
At first I felt uneasy spending it, following COVID-19 warnings to pay more attention to hand hygiene and the surfaces we all touch on a daily basis.
Now I have less and less opportunity to do so. While the World Health Organisation has never advised against using cash, more and more businesses are displaying signs that read “We Only Accept Contactless Payment” next to their registers.
A recent global poll conducted by MasterCard – a company with reason to favour card-based payments – found 82% of its users see contactless payments as cleaner than cash.
Online shopping is booming too. Amazon’s value alone has risen by 570 billion US dollars this year.
But while electronic payment may reduce our exposure to germs, it also shows banks, vendors and payment platforms what we do with our money. Social media is awash with posts condemning the forced use of contactless payment for fear of overseers eyeballing spending. Some people are even boycotting stores that won’t accept cash.
The growth of digital transactions exposes yet another aspect of our personal life to, what the social psychologist Shoshana Zuboff has called, “surveillance capitalism”. Financial data is now a valuable raw material that can be bought, sold and refined in the name of profit.
When the pandemic began, cash had already been on the decline for years. In Australia, demand for coins fell by more than 50% between 2013 and 2019.
For many people, increasing digitisation is synonymous with progress. It can be seen as a way of leaving the cumbersome, historical artefacts of coins and banknotes behind.
COVID-19 has accelerated this move away from cash. Wariness of microbe-ridden banknotes has seen contactless payment become a spontaneous public health standard.
Because cash is a social material, it moves between us, connecting us both financially and physically. The US Federal Reserve even decided to quarantine dollars returning from Asia earlier this year in an attempt to stop the coronavirus crossing its borders.
One perk of paper money is that it does not leave paper trails. Digital money, however, leaves traces in the databases of banks, vendors and platform owners, while governments look keenly over their shoulders.
Financial journalist Brett Scott calls this a “prison of watchable payments”.
Tax officials love digital transactions because they make it easier to monitor the nation’s economy. Banks and payment platforms are pleased as well: not only do they collect fees and gain the ability to allow or obstruct transactions, they can also profit from the troves of personal data piling up on their servers.
Internally, banks use this data to offer you other bespoke services such as loans and insurance. But information is also aggregated to better understand wider economic trends, and then sold on to third parties.
At the moment, these data metrics are anonymised but that doesn’t guard against retailers using de-anonymising techniques to attach transactions back to your identity.
Data brokers exist for this very reason: building digital profiles and creating a marketplace for them. This allows retailers to target you with tailored advertisements based on your spending. The devices at everyone’s fingertips become a feedback loop of information in which companies analyse what people have bought and then urge them to buy more.
Having records of every transaction can also be useful for individuals. Companies such as Revolut and Monzo offer “spending analytics” services to help customers manage their money by tracking where it goes each month.
But information about a user’s own behaviour never truly belongs to them. And, as the digital economist Nick Srnicek explains, “suppression of privacy is at the heart of the business model”.
While filling virtual baskets or paying by tapping a card does open up transactions for inspection, there are still ways you can protect your health and your data at the same time.
“Virtual cards” like those provided by privacy.com are one useful tool. These services let users create multiple card numbers for different online purchases that conceal consumption patterns from banks and credit card details from merchants.
Cryptocurrencies might also find a new limelight in the pandemic. Hailed as cash for the internet, the inbuilt privacy mechanisms of Bitcoin, Zcash and Monero could work to mask transactions.
However, finding companies that accept them is challenging, and their privacy capabilities are often overstated for everyday users. This is particularly true when using exchanges and third-party wallet software such as Coinbase.
In brick-and-mortar stores, staying under the radar can be more difficult. Prepaid cards are one option – but you’ll need to buy the card itself with cash if you want to keep your anonymity fully intact. And that takes us back to square one.
The Morrison government is acting to protect Australia’s fuel security as the international outlook becomes more uncertain and prices will be under increasing pressure.
Under the plan, operating through market and regulatory measures, the government will invest $211 million in new domestic diesel storage facilities, changes to create a minimum onshore stockholding, and support for local refineries.
Announcing the program with Energy Minister Angus Taylor, Scott Morrison said the changes “will ensure Australian families and businesses can access the fuel they need, when they need it, for the lowest possible price”.
Australia’s fuel supplies are always potentially vulnerable to international instability, something that the pandemic – with its disruption to supply chains – has just reinforced. Local refineries are also under economic pressures, with potential consequences for prices.
The measures are:
a $200 million investment in a competitive grants program to build an extra 780 megalitres of onshore diesel storage with industry
creation of a minimum stockholding obligation for key transport fuels, and
working with refiners on a market design process for a refining production payment.
The government is seeking to have the $200 million grants for new storage matched by state governments or industry. Its focus will be on projects in strategic regional locations, connected to refineries and with connections to existing fuel infrastructure.
Morrison said fuel security was essential for Australia’s national security and the country was fortunate there hadn’t been a significant supply shock in more than 40 years. Fuel security underpinned the entire economy, and the industry itself supported thousands of workers, he said. “This plan is also about helping keep them in work.”
Taylor acknowledged the pressure refineries are under.
The government says modelling indicates a domestic refining capability is worth some $4.9 billion over a decade to Australian consumers is terms of price suppression.
The construction of diesel storage will support up to 950 jobs, with 75 new ongoing jobs, many in the regions, the government says.
“A minimum stockholding obligation will act as a safety net for petrol and jet fuel stocks and increased diesel stockholdings by 40%,” Morrison and Taylor said in their statement.
They stressed the government’s commitment to onshore refining capacity. The industry’s viability is under threat.
The planned production payment scheme is to protect from an estimated 1 cent per litre rise that, according to modelling, would hit fuel if all refineries onshore were to close. Refineries receiving the support will have to commit to stay operating locally.
Under the minimum stockholding requirements, petrol and jet fuel stocks would be kept no lower than current commercial levels, which are about 24 consumption days.
Diesel stocks would increase by 40%, to be at 28 consumption cover days. This would add about 10 days to Australia’s International Energy Agency compliance total.
In July Australia had 84 IEA days including stocks on water. Implementing a minimum stock holding obligation would bring Australia into line with most IEA members which regulate their fuel industries to meet their security needs. Under the IEA treaty member countries are required to have 90 days of stocks.
(IEA days and consumption cover days are different.)
Refineries will be exempt from the obligations to hold additional stocks.
The production payments will ensure a minimum value of 1.15 cents per litre to refineries. A competitive process will determine the location of new storage facilities.
The government says it recognises “the future refining sector in Australia will not look like the past. However, this framework will ensure the market is viable for both our future needs and can support Australia during a severe fuel disruption.”
A new report from the New South Wales Productivity Commission (NSWPC) announces that “[higher] housing costs […] impose broader economic costs”. That chimes with our own newly published research. The implication is that Australia’s heavily capitalised housing market will weigh down economic recovery from the shocks of the coronavirus pandemic.
A niche group of economists and epidemiologists had warned the world for decades that a pandemic would have devastating economic and social consequences. When it comes to Australia’s housing, though, the COVID-19 crisis has only served to highlight deep and long-standing faultlines.
The housing system has produced triple crises of rising homelessness, growing queues for non-market, affordable housing and the pervasive affordability problems for middle- and lower-income households who depend on the private housing market. All these pressures were building well before the pandemic.
However, a particularly cruel COVID-19 effect has been the concentration of pandemic impacts on public-facing economic sectors and jobs. Younger people and female employees have been hit hardest. The fallout in the lower end of the labour market will only make existing pressures worse.
Australia is about to embark on an audacious economic and social experiment as it tries to wind back the JobKeeper and JobSeeker programs temporarily protecting about 3.5 million people. Treasury projections envisage a gradual withdrawal. In reality, especially if any eviction moratoria are allowed to lapse, the start of this process will likely trigger huge immediate challenges in managing the housing and homelessness fallout.
Beyond that, the recession will drive home the need for political leaders to more fully appreciate the integral role of housing in the economy. The housing system plays key roles in shaping economic productivity, stability and inequality.
For many decades economics-leaning policymakers have assumed the housing market is largely a well-functioning system driven by helpful economic forces. Most famously personified in comments by former prime minister John Howard, and very much in tune with dominant media messaging, Australian governments have generally welcomed rising house prices as signifying consumer confidence. Even academic researchers and government analysts have cited house prices as a sign of the “success” of cities and regions.
More recently, ever-rising house prices have finally been recognised as a driver of wealth inequality. The problem is linked to rising mortgage debt and increasingly recognised as likely to add to instabilities in the macro economy and financial system.
There are also growing policy concerns that city living is becoming too expensive. This in turn harms economic productivity. [OECD data] show Australia is on a similar path to the US, with the metropolitan share of national GDP per capita falling in recent years.
The NSWPC report recognises that the combination of excessive rents and insecure tenure can damage children’s educational attainment and prospects. Prices and rents are particularly unaffordable in Sydney, making it a more stressful place to live and work. Resulting migration to other parts of the country reduces employers’ access to the supply of willing and productive labour, thus damaging productivity.
But the NSWPC analysis of housing-to-economy interactions does not go anything like far enough. As our research shows, Australia’s dysfunctional housing system results in a battery of other economically harmful impacts. These include:
long-term policies that have diverted savings and investment into rising property and land prices, with minimal or no employment or productivity benefit
excessive rent and mortgage burdens diverting household spending from other consumption with greater productivity impacts
a dysfunctional housing system that reduces household savings for the longer term, as well as contributing to falling rates of home ownership and personal asset accumulation for future generations of older people.
Perhaps worst of all, the high private housing debt in Australia is among the worst in the world. The International Monetary Fund (IMF) and the OECD recognise this debt as a threat to financial and economic stability.
Economics students are taught the “paradox of thrift”: when an individual saves, it benefits them in the long run. When too many people save, it harms economic growth.
In a similar way, rising housing prices benefit owners of houses and/or investments. But when we scale up to the level of a locality, city, state or economy, rising prices have a profound negative impact.
With all this in mind, our report lays out a wide-ranging “housing and productivity” research agenda. The hope must be that the resulting evidence helps trigger the policy reboot needed to transform the housing system from being part of the problem to part of the solution.
Much more attention needs to be focused on how owners and renters adjust savings and spending as a result of excessive housing costs. Without knowing about these behavioural responses, it is impossible to design appropriate policies.
We must find ways to restore the housing prospects of younger and/or less affluent households. We must research the potential for schemes to help first home buyers with deposits, and assess how better credit scoring methods could reduce pressures on rental markets. This is particularly important because currently used credit scoring methods disproportionately reward access to wealth, and do not adequately capture important aspects of prospective borrowers’ consumption and saving behaviour.
Delayed home ownership entry or permanent exclusion have major long-term implications. Worryingly, the negative impacts on economic productivity and stability have been largely ignored to date.
The Grattan Institute estimates home-ownership rates for the over-65s will fall by 19% by 2056. The impacts on retirement incomes will be significant.
Policymakers haven’t planned for the inevitable rise in need for social housing from impoverished older private renters. The present system has glaringly failed to provide housing affordable for more than half of Australia’s low income tenant population. Acting on the mounting economic imbalances caused by the housing crisis could, at the same time, generate a more productive and stable economy.
Australian housing research and policy urgently needs a new economic conversation.
Hal Pawson, Professor of Housing Research and Policy, and Associate Director, City Futures Research Centre, UNSW; Bill Randolph, Director, City Futures Research Centre, Faculty of the Built Environment, UNSW; Chris Leishman, Professor of Housing Economics, and Duncan Maclennan, Professorial Research Fellow in Urban Economics, UNSW; Professor of Strategic Urban Management and Finance, University of St Andrews; Professor in Public Policy, University of Glasgow